The Australian Family Court system is broken1:27

The High Court has confirmed a $50,000 pre-nup is not valid.Source:istock

IN 2005, Kanye West delivered some sage advice to all wealthy men thinking of entering into marriage with money-hungry women, disparagingly referred to as “gold diggers”.

If you “ain’t no punk”, the rapper warned, “holla we want prenup”. A pre-nuptial agreement is “something that you need to have”, according to Kanye, because when she “leave yo’ ass”, she is going to “leave with half”.

The song remains a classic, but legal experts say a landmark ruling handed down by the High Court on Wednesday spells the “death knell” of pre-nuptial agreements, known as binding financial agreements in Australia.

The decision in Thorne v Kennedy, in which a young Eastern European woman successfully fought to overturn a prenup she signed on the eve of her marriage to a millionaire property developer twice her age, has sent shockwaves through the family law fraternity and could trigger a wave of lawsuits seeking to overturn existing financial agreements.

From a paltry $50,000 she would have been entitled to under the previous agreement, the woman is now set to become a millionaire in her own right.

“Even the lawyers within my team, the young ones, they don’t realise the significance of this yet,” said Slater and Gordon family law expert Heather McKinnon. “It’s really funny. The High Court doesn’t enter our jurisdiction very often — the last [decision] was probably seven or eight years ago — but when it does, it’s significant.”

The landmark case, which has been closely watched by family and commercial lawyers, started way back in 2006 when the then 67-year-old property developer met the 36-year-old woman on a website for potential brides.

Mr Kennedy told Ms Thorne — both pseudonyms, as neither party can be identified in a Family Court case — shortly after they met online, “If I like you I will marry you but you will have to sign paper. My money is for my children.”

Mr Kennedy, a divorcee with three adult children, had assets worth between $18-$24 million, while Ms Thorne had no substantial assets and spoke limited English. Seven months after they met, she moved to Australia to marry Mr Kennedy.

The primary judge noted that Ms Thorne left behind “her life and minimal possessions” and that “if the relationship ended, she would have nothing, no job, no visa, no home, no place, no community”.

Shortly before the wedding, Ms Thorne signed the prenup at the insistence of Mr Kennedy, who threatened to call off the wedding if she did not sign.

That was despite independent legal advice that the agreement was “entirely inappropriate” and the worst her solicitor had ever seen. She then signed another agreement 30 days after the wedding.

Together, the agreements limited her claim to any property settlement to $50,000 after three or more years of marriage. The pair divorced in 2011 after three years of marriage. Ms Thorne took her ex-husband to court in 2012 seeking for the agreements to be overturned.

She sought a property settlement of $1.24 million, including spousal maintenance. Mr Kennedy died in 2014, but his estate continued to fight against Ms Thorne’s bid for a bigger slice of his wealth.

The Federal Circuit Court initially found in favour of Ms Thorne, on the basis that her consent had been negated by way of “undue influence and duress”. Mr Kennedy’s estate appealed to the Full Court of the Family Court of Australia.

The appeal was successful, with the Family Court finding Ms Thorne’s consent had not been affected by undue influence. She appealed that decision, and was granted special leave to the High Court in March this year, with the appeal heard in August.

A woman has won her High Court case disputing a pre-nup she signed before marrying a millionaire.Source:istock

In its decision, the High Court unanimously found the agreements should be set aside for “unconscionable conduct”, while a majority of the High Court also held that the agreements should be set aside for “undue influence”.

“The findings and conclusion of the primary judge should not have been disturbed,” the High Court wrote. “The agreements were voidable due to both undue influence and unconscionable conduct.

“The fact that Ms Thorne was willing to sign both agreements despite being advised that they were ‘terrible’ serves to underscore the extent of the special disadvantage under which Ms Thorne laboured.”

Ms Thorne’s case will now return to the Federal Circuit Court for a determination on payout. Ms Thorne’s barrister, former Queensland Attorney-General Matt Foley, and Roberth Letherbridge SC, acting for Mr Kennedy’s estate, have been contacted for comment.

According to Ms McKinnon, most in the legal community were saying “it will spell the death knell” of prenups. “The Family Law Act has generally been seen as what we call equities law, so the trial judge has to weigh up what’s fair,” she said.

“A few years ago the parliament introduced a law to say that people could regulate their finances through a binding financial agreement, or in lay terms a prenup, but most family lawyers have had concerns that it’s very hard to impose contract law on family law.

“[That’s] because contract law assumes that people have equal bargaining power, and clearly they don’t, so you’ve had this split between lawyers who believe you should be able to bind people in a contract, and lawyers who believe you can’t in a personal relationship.”

The High Court decision means the lawyers on the “equity” side of the argument won. “The inequality in a relationship almost means it’s impossible to have an equal bargaining power due to differences in age, state of health, mental capacity,” Ms McKinnon said.

She said anyone with existing prenups should be looking over the document with a lawyer in light of the judgement. “You’re better to tell your clients to rely on the Family Law acts,” she said.

Scott Wedgwood, partner at Barry Nilsson Lawyers, pointed out that Mr Kennedy would not have been privy to the independent legal advice received by his wife which later surfaced in court.

“He’s gone about his life after entering into the deed thinking it was binding,” he said. “Here we have a ticking time bomb if you like, because he lives his life, got his property pool, thinks his inheritance for his children might be safe from acrimony.

“He might act in a manner to create more property, thinking all the time it’s not at risk because the lawyers involved have all complied with the Act.

“People can control their conduct, they can monitor their behaviour in negotiations, but they just won’t know what’s going to be said about the process, they won’t know the advice of the other lawyer until it surfaces such as it has here sometimes a decade down the track.

“I know there are lawyers scratching their heads about whether they’re going to draft BFAs for their clients.”